Morrison rallies as FTSE 100 struggles to break 6,600
* FTSE 100 flat at 6,587.74
* Morrison rises on short covering post results
* AMEC gains after pulling out of Kentz deal
* Aggreko falls on earnings worries
By David Brett
LONDON, Sept 12 (Reuters) - Grocer Wm Morrison led the gainers among Britain's leading shares on Thursday after posting its first-half results but the index continued to toil around the 6,600 level.
Wm Morrison Supermarkets rallied 2.2 percent with traders citing dividend, outlook, and valuation attractions as a trigger for short covering after the firm's first-half results came in just shy of expectations.
Wm Morrison, the UK's fourth biggest supermarket, is the 10th most shorted stock - bets the share price will fall - on London's blue chip FTSE 100, according to data from Markit, while 22 out of 25 analysts covering the stock rating it as either a "hold" or "sell".
AMEC, meanwhile, climbed 2.2 percent after the British engineer said it will not make an offer for oil and gas construction firm Kentz, as it continues to try to expand in Australia, Africa and the Middle East.
Kentz slid 10 percent.
The FTSE 100 was flat at 6,587.74, by 1413 GMT, in a quiet session - the index traded just 54 percent of its 90-day daily average volume - with the healthcare sector posting the biggest gains.
AstraZeneca added most points among drugmakers, rising 1.2 percent after French peer Sanofi withdrew its U.S. application for diabetes treatment lixisenatide, which shares the same mechanism as AZN's Byetta/Byduren which is already on the market.
Panmure Gordon said lixisenatide's delay to 2016 at the earliest allows AZN more room to grow the product and asked more broadly if now might be the time to buy AZN's shares with the sequence of market downgrades for the stock beginning to level off?
The broader index, however, continues to struggle to breach 6,600 - a level it has closed above just once since early August.
Steve Ruffley, chief market strategist at InterTrader, said the FTSE 100 was seeing technical resistance at 6,569.65 and higher at 6,616 but with firm support not far away the index was likely to keep in a tight range.
"We have support at 6,479 and 6,434. With the speculation of Federal Reserve stimulus easing on the cards there may be some dip-buying opportunities," he said.
Aggreko fell 2.2 percent with traders citing a note from Deutsche Bank as the catalyst. The investment bank cut its target price on the company by 11 percent to 1,870 pence and gave a cautious outlook for earnings.
Aggreko, which released two profit warnings late last year, is currently the third most shorted stock on the FTSE 100 with near 25 percent of the stock available for loan being utilised by investors betting the stock will fall, data from Markit showed.
Miners were the main sectoral weight on the index, giving up some of their recent gains which had been secured following more robust global economic data.
But the British stock market is set to rise 30 percent in the next two years as the country's economy recovers, boosting stocks with a domestic exposure such as banks, retailers and real estate firms, according to Bank of America - Merrill Lynch.
"Recent economic data reinforced the growing sense that the UK economy is emerging from its longest period of underperformance since the 1930s," they said in a note.
They expect the blue-chip FTSE 100 index, which accounts for 85 percent of the total market cap, to hit 7,400 points at the end of 2014, from 6,579.96 points currently. (Reporting by David Brett; Editing by Toby Chopra)